Earlier this year, Facebook famously unveiled Libra to the world. The cryptocurrency project, billed as a way to empower billions, quickly became the talk of the town, with the phrases “Libra” and “Facebook’s crypto/blockchain” gracing the notifications of the phones of millions.
Unsurprisingly, central banks, governments, and traditional institutions were quick to take notice of this new entree into the fintech space.
While some in the aforementioned group have embraced Libra with open arms — IBM, for instance, wants to help Facebook with blockchain — governments and their respective central banks are taking a cautious approach.
The fear is that if Libra, despite it being 1:1 backed by fiat currencies, gains enough traction, it will begin to encroach on the monetary sovereignty that states have while also posing a security threat to citizens.
The cautious approach by central banks has resulted in discussions regarding the creation of antitheses to Libra — central bank digital currencies (CBDCs).
While a digitized pound or dollar seems like a concept out of a sci-fi model, Dutch financial institution ING’s chief economist, Mark Cliffe, has argued that the launch of Libra will only catalyze and expedite the establishment of CBDCs.
Central Bank Crypto Assets Inbound
In an article and accompanying video published to ING’s blog, Cliffe argued that a “fully-fledged digital currency from a G20 central bank” isn’t out of the realm of possibility.
In fact, he argued that with the launch of Libra, there has been a “sense of urgency” within the monetary policy community that central banks need to react. This urgency, he claims, will result in large central banks making moves to establish their own digital assets within the “next two to three years”.
The benefits that would come with these assets, he claimed, would aid the economy. One benefit he discussed, albeit briefly, was negative interest rates. With a fully-fledged digital currency system, central banks could impose negative interest rates on all consumer accounts, giving these authorities much power in dictating the direction in which an economy should take.
While Cliffe’s timeline seems short in and of itself, a central bank is seemingly on the verge of rolling out a cryptocurrency in the next years, if not in the next few months. This central bank is the People’s Bank of China (PBoC).
For over five years now, the Chinese monetary authority has seemingly been hard at work on a cryptocurrency, having sent out requests to hire blockchain developers and making other moves in the space.
In August, PBoC deputy director Mu Changchun revealed to financial leaders in China that the digital asset’s prototype has been completed and may soon launch. A Forbes story corroborated this, with sources telling the outlet that some of China’s largest banks and corporations may soon gain access to the digital payments ecosystem.
State-run news outlets have denied the vicinity of the project, claiming there is “no timetable”. But, if Cliffe’s expectations are correct, China may begin to roll out its own cryptocurrency as Libra gains steam.
China is the only country that is publicly on the verge of going crypto. However, there are countless other nations in which a CBDC has been mentioned or proposed.
As reported by Blocknomi previously, a representative of the North Korean regime told VICE that the country currently has a cryptocurrency in the works that is being built to “avoid crippling international sanctions and circumvent the U.S.-dominated global financial system”. The source explained that the token is in its “early stages” of creation, with developers in the nation currently working on a way to back the cryptocurrency with a physical asset.
There has also been some talk of the European Union creating its own cryptocurrency to counteract Libra. But this, at the moment, seems to just be a far-fetched idea.